For the first time in 2 years, the MF industry has witnessed a decline in folios. The number of folios in November has declined by more than 39,350 to 9.367 crore from 9.371 crore in October.
This was largely because of the decline in equity fund folios. While more than 2.76 lakh new folios were opened in debt funds, the folio count in equity funds fell by more than 3.95 lakh. Even in hybrid funds, the total folios declined by 1.04 lakh in November.
NS Venkatesh, Chief Executive at AMFI attributed this fall to the profit booking in equity funds. He said that since the equity markets have rallied, many investors booked profit and the folios became zero folios.
Some of the industry experts, however, feel that the data indicates not just profit booking but complete exit as well. A CEO said on the condition of anonymity that while some investors have booked profit to rebalance their portfolio by investing in debt funds, a large number of investors have completely exited equity funds. These investors were in a wait and watch mood since a sharp decline in March. They exited equity funds after prolonged underperformance, he added.
“Nearly 60% of the schemes have underperformed. And many of them have underperformed even after 10 years of investment. Therefore, as soon as their portfolio showed some profit, these investors considered it a good opportunity to exit these funds that have offered subdued returns. Such investors fear that the market can correct by 3-5% anytime,” he added.
Even after the recent rally, many large cap funds have a CAGR of less than 9% in 10 years and the category average stands at around 9.5%. Similarly, multi cap funds have an average 10.5% CAGR for 10 years while large & mid cap funds have 11.3% CAGR in 10 years. The CEO added that such performance is far below the returns expected by the investors in the long-run.
